Roubini’s April 2020 Interview Expanded to Include the Energy/Thermodynamic Factors at Work in the Economy

By B.G.

When I first read interviews with Dr. Nouriel Roubini with him predicting a “Greater Depression for the Decade of the 2020s,” early in the pandemic rollout, I made a point of re-posting and sharing these. After all, Dr. Roubini had fairly well predicted the global financial crisis and “Great Recession” that was to come, back in the 2007-08 period.

What seemed to be missing out of Roubini’s listing of “deadly drivers” for an even greater recession, were the energy or thermodynamic factors. At the time of his 2020 predictions, Dennis Coyne had written in Sept 2019 a definitive piece on the “World Oil Shocks” which he had pinned to the middle and later years of this decade. This was followed by the Geological Survey of Finland’s comprehensive report by Simon Michaux, “Oil from a Crititcal Raw Material Perspective” which came out in December, 2019, just before the pandemic hit the news wires.

So I would add to the “Deadly Drivers” list these points–

First, the beginning of decline of daily global oil production, with attendant impacts on the global “industrial ecosystem” as Michaux calls the system. As Art Berman, oil industry consultant, often says, “energy is the economy.” Both Berman and Michaux of Finland are quite clear that the fossil energy sources will decline much faster than they can be replaced by renewables. And Michaux is clear, in a 1,000-page report, that there is not the capacity, globally, planet-wide, to replace the fossils with renewables.

Second is an accompanying decline and fall in natural gas production, which in the USA will occur with the decline and fall of the seven major shale-gas fracking regions. The disruptions in Europe’s natural gas situation which began well before Russia’s invasion of Ukraine showed up on the business pages late in 2021, before the Russian tanks’ roll-in to Ukraine. In fact much of the problem was traced to the U.S.A. interfering in planned Russian pipeline expansion toward western Europe, with various sanctions causing pipeline projects to be held-up indefinitely.

Another factor particular to the USA is proving to be the extreme rise in the cost of housing to the young “non-elite workers” as Gail Tverberg calls the 90% of our workforce who are counted on to drive the Gross Domestic Product. At the start of this decade, housing insecurity really stepped up as a critical survival issue for both Millennials and Gen Zero. Having to constantly worry about having enough to make rent at the end of the month does sharply constrain a person’s consuming power to contribute to consumer spending in the broad economy.

What appears to be happening is that rentier capital–those who live off of rents and interest–is working in a self-destructive manner that weakens the ability of productive and distribution capitalists to raise their take from the workers’ spending power. This process will, I think, accelerate this “greater depression” that Roubini saw in the cards some 30 months ago.

A fourth additional “driver” factor towards this economic crisis ahead is proving to be the price-gouging or oligopolist pricing tendency of the corporations. We saw this at work in the way that fuel prices to the consumers accelerated much faster than could be accounted for by the disruptions brought by Russia’s war on Ukraine or the decline in USA’s oil production in the period of April 2020-mid 2022. We can expect, if a greater recession gets underway, that the corporations in general will attempt to maintain exorbitant pricing so as to weather the storm and please the stockholders while the general, working-class population, suffers.

A final factor that will I think drive us toward recession is the inadequate wages of the so-called “essential workers” who the nation “discovered” during the pandemic. Workers who could not escape the pandemic by working from home. You can’t very well load from home Amazon logistics trucks with boxes full of goodies being ordered from homes of people higher on the income scale. Workers in “essential” retail stores, restaurants, fast-food franchises, meat-packing plants and on and on, were unable to shield themselves from the pandemic ravaging the nation. Other essential workers such as teachers and front-line health workers suddenly found themselves to be not nearly compensated well enough for the growing disrespect for all workers that the anti-worker political bloc in the Congress and State Houses was ginning-up. I am sure that the workforce disruption of these past three years will be a contributor to the greater depression that Roubini talks about.

So I would add these 5 deadly drivers to Roubini’s initial accounting. Here’s a video clip from a brief interview Dr. Roubini had with Yahoo News. It’s very brief, just perfect for the brief American attention span. Quick take-aways. Video at bottom of the post.

Roubini:
“and I pointed out there were ten deadly drivers of this disruption and economic deficiencies.

This started after the Global Financial Crisis, but they are being exacerbated by this Coronavirus crisis.

1) Things like tax deficits and default.
2) Poor demographics is going to be a big liability.
3) Or initially deflation, followed by debasement of currencies as we monetize the fiscal deficits; we’re going to end up, eventually with inflation.
4) We have features of disruption with A.I. and automation.
5) And then, rising inequality.
6) And then you have de-globalization, as there is a backlash against trade, immigration and open markets.
7) And then you have a democracy backlash.
8) And then from there you go to this duopolistic rivalry between the U.S. and China,
9) and the digital rivalry between U.S. and China as well.
10) And you finish with deadly, manmade disasters like pandemics and climate change–they’re not natural disasters, but as we know are manmade.

You combine these ten forces–and they’re all very disruptive–and you might have, eventually, a greater depression. But this is not the story for this year or next, but for the middle of the decade.”